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Risk Appetite Trying To Hold Onto Its Tailwinds Heading Into Wed’s US-China Trade Agreement Signing

Notes/Observations

  • US lifted its designation of China as a currency manipulator noting that China had made “enforceable commitments” not to devalue the yuan and has agreed to publish exchange-rate information
  • US corporate earning seasons begins

Asia:

  • China Dec Trade Balance: $46.8B v $45.7Be; Exports Y/Y: 7.6% v 2.9%e; Imports Y/Y: 16.3% v 9.6%e. China’s soybean, pork imports from the US have significantly rebounded in December
  • Japan Nov Current Account Balance (BOP basis): ¥1.437T v ¥1.423Te; Trade Balance: -¥2.5B v +¥103.8Be

Europe:

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  • ECB chief Lagarde: targets Jan 23rd to announce ECB strategy review

Brexit:

  • EU said to be requiring fishing to be included in post Brexit trade agreement (UK said it wanted to control its waters after Brexit)

Americas:

  • Treasury Semi-annual currency report confirmed the removal of China from the designation as a currency manipulator; Insisted that China take necessary steps to avoid a persistently weak currency. Continuing to monitor currency practices of China, Germany, Ireland, Italy, Japan, South Korea, Malaysia, Singapore, Vietnam and Switzerland. Real dollar remains 8% above its 20-year average; sustained dollar strength would likely exacerbate persistent trade and current account imbalances
  • Trade Rep Lighthizer: Close to being finished with translation of phase 1 China trade agreement, deal included commitments on currency manipulation. Added that US was going to make it public on Wednesday before the signing of the trade agreement
  • Speculation of what the Phase-1 trade agreement said to contained China commitment to buy $200B of US goods over a two-year period in four industries. Target for manufactured goods purchases will be the largest, worth around $75B; China to also promise to buy $50B w